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SBI Funds Management Private Limited

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities; and the breakdown of your actively managed listed equities by strategy or combination of strategies.

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
98.55 %
Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
1.45 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to ESG incorporation and the reasons for choosing the particular strategy/strategies.

At SBIFMPL, we integrate ESG factors into our research and investment decision making process. ESG research focuses on the critical environmental, social and governance factors which can have a material impact on the long-term sustainable performance of the company. We firmly believe companies with improved management of ESG practices, can optimise their business models thereby increasing productivity, creating a distinct competitive advantage and increasing consumers’ brand trust to deliver sustainable shareholder value. It also presents an avenue to effectively manage risks as well as take advantage of opportunities. This will not only unlock greater value for the company and its shareholders, but also contribute to the desirable social and environmental outcomes we believe in.

SBIFMPL has developed a fundamental, bottom-up investment framework to evaluate companies on ESG for its equity investments. ESG analysis is a mandatory component of our equity initiation reports. The first step involves a thorough financial analysis through SBIFMPL coverage. This is followed by an in-depth ESG analysis to determine final investment recommendations. We have a two-pronged approach for integrating ESG considerations in our equity portfolio:

Internal Framework for ESG integration: We have formulated an internal framework to score the ESG performance of every company in our coverage. Our ESG analysis is based on a Best-in-Class approach. The methodology consists of scoring companies on their ESG practices on over 40 parameters related to a firm’s disclosures on environmental, social and governance initiatives and aims at assessing its compliance as well as pro-active readiness for ESG issues on a scale of 1-100. The scores are assigned based on data available through primary and secondary sources. Material issues like carbon emissions, air emissions, waste management, water consumption, afforestation, effluent management and energy efficiency etc. are covered under the environment segment. The social aspect is assessed on the disclosures related to their relations with community, and workforce, especially with reference to diversity, wage, health and safety issues. We also have a firm belief that good governance is the key to a sustainable organisation, and therefore, we evaluate the board composition, accounting and audit quality and disclosures, anti-corruption policies etc. to assess their governance practices. Though overall ESG integration is the “best in class approach”, we also apply an exclusion methodology for certain specific funds. The framework is still evolving, and we endeavour to ensure robustness of our ESG assessment.

External Agency rating on ESG performance: We have partnered with both domestic and international service providers that rate companies on the basis of their ESG risk profiles and management initiatives. Risk profiles are determined on the basis of their business and geographic locations. The rating takes into account all environmental, social and governance issues material to the company. This provides us in depth data to assess a company’s performance year-on-year and across its sectoral peer groups. 


01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

For our thematic Fund, i.e. SBI Magnum Equity ESG Fund, we apply a combination of strategies for ESG integration:

Negative Exclusion:  In this screening, we exclude sectors that we believe are not aligned to our ESG philosophy. We exclude five sectors viz. Tobacco, Alcohol, Adult Entertainment, Controversial Weapons and Casinos. We do not invest in these sectors despite their financial profitability or positive ESG scores.

Best-in-class Approach: After screening out the negative sectors, we use our internal/external ESG scores to select and assign weights to the stocks in our portfolio.

IMPORTANT NOTE: For the purposes of every section of this report except Organisational Overview, we have considered March 2019 to March 2020 as the time period. Only in OO Module, we have reported figures from March 2019 as our audited accounts are not in public domain yet.

LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

02.2. Indicate whether you incentivise brokers to provide ESG research.

02.4. Additional information. [Optional]

LEI 03. Information from engagement and/or voting used in investment decision-making

03.1. Indicate whether your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]

ESG factors are an integral part of the decision-making process. the following steps are taken to include ESG bases analysis in investment decisions:

  • Financial analysts fill out the initiation ESG questionnaire for every company with support from ESG analysts
  • Financial analysts are marked on all communications that are sent to companies for ESG based discussions
  • Most meetings related to ESG are conducted in the presence of financial analysts responsible for the sector
  • Financial analysts are invited to monthly ESG Review meetings where score upgrades and downgrades are discussed 

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by


SBIFMPL uses ESG based negative screening for all listed equities under our coverage. We score companies on an internal ESG based questionnaire as a process of Initiation in our universe. We have internally set thresholds to see if the companies score above por below the set benchmark. The companies scoring below the threshold are not invested in.

We also check the ESG scores of companies in our coverage on a monthly basis. We have hired services of one international and one domestic ESG ratings/service providers. Since international service providers use disclosure-based models to provide ratings, we have made a customised questionnaire with our domestic service provider in order to reach out to companies who do not publish ESG based information publicly. This serves a dual purpose of scoring them in a better manner and also encouraging them to publish this information on their periodic disclosures/website.

We also use a sector based negative screen in our SBI Magnum Equity ESG Fund along with ESG score-based screening. The idea is to first exclude sectors like Tobacco, Alcohol, Adult Entertainment, Controversial Weapons and Gambling from the list and overlay the ESG scores on top of this selection to construct the portfolio.

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

  • We send out emails to investee companies when we make changes in our ESG questionnaire and ask them for new data points
  • We also (if needed) meet the companies in person to inform them about our new criteria

LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

05.5. Additional information. [Optional]

LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

06.2. If breaches of fund screening criteria are identified, describe the process followed to correct those breaches.

At SBIFMPL, we screen the investment universe for applied negative and positive screeners at the time of investing and at the end of every month to ensure the portfolio meets the specific criteria laid out.

The risk department acts as an independent internal audit. It screens the portfolio against the specific negative and positive criteria laid out and checks for breaches. Breaches can be at the time of initial investment or subsequent to the investment. At the time of investment, the breach is rectified within 30 days by selling the position. Post investment the cause of the breach is first analysed. The breach could have  occurred due to a change in the scoring criteria by the external agencies or an event occurring which has changed the score of the company. The process is to have an interaction with the investee company to understand the causes and any remedial action being taken as well as future mitigation strategies. Depending on the severity of the issues and the company response, portfolio action is determined.

All regulatory limits have zero tolerance and hence very stringent controls have been put in place to ensure compliance with the same. We have following two levels of control to check all limits pertaining to the investments made:

  1. Ex-ante control – Regulatory limits defined by SEBI and SID asset allocation limits are incorporated as hard limits in the front office system as a control to pre-empt the risk of a regulatory limit breach. There is a corresponding alert level defined for every regulatory hard limit. Some of the internal limits are also defined in the front office system as soft limits.
  2. Ex-post control – A second level control is exercised by the risk management team daily through the limit breach reports generated from the front office application.

Breaches, if any are flagged off as per the defined Breach escalation process laid down in the approved documented Risk Policy of the company.


06.3. Additional information. [Optional]

(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis




Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

100% of our investment universe is analysed for ESG based assessment.

LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information. [Optional]

LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.6. Additional information. [OPTIONAL]